Aon To Keep Acquisition's Contingents

Chicago-based insurance broker Aon Corp. said that five government agencies have agreed to allow firms acquired by Aon to continue to accept contingent commissions for a limited time.

Aon announced today that the attorneys general of New York, Illinois and Connecticut, and the insurance departments of New York and Illinois have agreed to an amendment that will permit companies acquired by Aon to continue to accept contingent commissions for three years following their acquisition by Aon. The five were parties to the 2005 settlement that bars the acceptance of contingent commissions by the firm.

Under the amendment, a company acquired by Aon will be able to continue accepting contingent commissions on existing business for three years while it phases out contingents and comes into line with Aon's other business reforms.

"This amendment advances the goals of transparency and compensation reform in the insurance industry--goals that Aon strongly supports," David Prosperi, vice president of global public relations with Aon Corp., said in a statement.

"For the last three years, brokers that have not introduced such reforms have had an unfair advantage in bidding to acquire other brokers, because they could assume a continued stream of contingent commissions from the acquired company, whereas Aon could not," he said. "This had the perverse result of favoring brokers which still accept contingents and are not transparent to their clients. The amendment agreed to today will permit Aon to compete on a more level playing field when seeking to acquire smaller brokers."

A source indicated that Marsh and Willis--the other two brokers who entered into a similar agreement as Aon back in 2005--have similar understandings with the government agencies.

The 2005 agreement was the result of allegations made against the brokers that they engaged in the steering of insurance contracts to certain preferred insurers in exchange for lucrative contingent commissions. None of the brokers admitted any wrongdoing in the agreement.